How Scoring Helps You
Insurance scores give insurers a fast, objective measurement of the likelihood that you'll submit a claim against your insurance policy. Before the use of scoring, the underwriting process could be slow, inconsistent and very subjective.
Insurance scores – especially FICO Credit-Based Insurance Scores (the most widely used insurance scores) – have made big improvements in the underwriting process. Because of insurance scores:
- People can get insurance faster.
Scores can be delivered almost instantaneously, helping insurers speed up application and policy approvals. Today many underwriting decisions can be made within minutes. Scoring also allows agents and internet "quoting" sites to make "instant insurance" decisions. Use of insurance scores also frees an insurance underwriter to focus more attention on the few applications and policies that require greater attention.
- Underwriting decisions are fairer.
Using scoring, insurers can focus only on the facts related to your insurance risk, and be sure they are making objective, impartial decisions. Factors like your gender, race, religion, nationality and marital status are not considered by insurance scoring. Only pertinent credit-related information is evaluated in an insurance score.
However, please note: In the application process, your insurer will probably ask your age, gender, marital status, and where you live, because this information is often necessary to determine your insurance rate according to your insurer's state-approved rating plan. For more complete information, you can learn more about what's in your score and what's not in your score.
- Credit "mistakes" count for less.
Improving your score can also lead to more favorable insurance rates.
If you have had less than stellar credit performance in the past, insurance scoring doesn't let that haunt you forever. Past credit problems fade as time passes and as recent good payment patterns show up on your credit report. Because insurance scoring weighs all of the credit-related information – both good and bad – in your credit report, past mistakes can be counterbalanced by continuing good payment patterns.
- More insurance is available.
Insurers who use insurance scoring can approve more applications, because insurance scoring gives them more precise information on which to base underwriting decisions. It allows insurers to identify individuals who are likely to perform well in the future, even though their credit report may show past credit management problems. Even people whose scores are lower than an insurer's cutoff for "automatic approval" benefit from scoring. Many insurers offer a choice of policies geared to different risk levels. Most have their own separate guidelines, so if you are turned down for one insurance policy, another may meet your needs. The use of insurance scores gives insurers the confidence to offer insurance to more people, because they have a better understanding of the risk they are taking on.
- Insurance rates are lower overall.
With greater insurance availability, more competition, the cost of insurance for policyholders generally decreases. Automated underwriting processes, including insurance scoring, make the underwriting process more efficient and less costly for insurers, who in turn have passed savings on to their customers. And by controlling insurance losses using scoring, insurers can make rates lower overall.